The Securities and Exchange Commission announced charges in an alleged insider trading scheme involving tips of nonpublic information about government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers or suppliers.
The SEC's complaint alleges that David Blaszczak, a former government employee turned political intelligence consultant, obtained key confidential details about upcoming decisions by the Centers for Medicare and Medicaid Services (CMS) from his close friend and former colleague at the agency, Christopher Worrall.
According to the SEC's complaint, Worrall serves as a health insurance specialist in the Center for Medicare and tipped Blaszczak about at least three pending CMS decisions that affected the amount of money that companies receive from Medicare to provide services or products related to cancer treatments or kidney dialysis.
Blaszczak allegedly tipped two analysts at a hedge fund advisory firm that paid him as a consultant. The analysts, Theodore Huber and Jordan Fogel, allegedly used the nonpublic information to recommend that the firm trade in the stocks of four health care companies whose stock prices would likely be affected by the decisions once CMS announced them publicly.
The alleged scheme resulted in more than $3.9 million in illicit profits.
"As alleged in our complaint, a federal employee breached his duty to protect confidential information by tipping a political consultant who then passed along those illegal tips," said Stephanie Avakian, acting director of the SEC Enforcement Division. "There's no place on Wall Street or in our government for such blatant misuse of highly confidential information."
According to the SEC's complaint, Blaszczak's firms were paid at least $193,000 in a 19-month period by the hedge fund where the analysts worked.
The SEC's complaint, filed in U.S. District Court for the Southern District of New York, charges Blaszczak, Worrall, Huber and Fogel and seeks disgorgement of ill-gotten gains plus interest, penalties, and permanent injunctions. In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced related criminal charges.
SEC Charges Fake Filer With Manipulating Fitbit Stock
The SEC filed fraud charges against a Virginia-based mechanical engineer accused of scheming to manipulate the price of Fitbit stock by making a phony regulatory filing.
According to the SEC's complaint, Robert W. Murray purchased Fitbit call options just minutes before a fake tender offer that he orchestrated was filed on the SEC's EDGAR system purporting that a company named ABM Capital LTD sought to acquire Fitbit's outstanding shares at a substantial premium. Fitbit's stock price temporarily spiked when the tender offer became publicly available on Nov. 10, 2016, and Murray sold all of his options for a profit of approximately $3,100.
The SEC alleges that Murray created an email account under the name of someone he found on the internet, and the email account was used to gain access to the EDGAR system. He then allegedly listed that person as the CFO of ABM Capital and used a business address associated with that person in the fake filing. The SEC also alleges that Murray attempted to conceal his identity and actual location at the time of the filing after conducting research into prior SEC cases that highlighted the IP addresses the false filers used to submit forms on EDGAR. According to the SEC's complaint, it appeared as though the system was being accessed from a different state by using an IP address registered to a company located in Napa, California.
In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Murray.
